The EU's Bank Recovery & Resolution Directive

The EU's Bank Recovery & Resolution Directive sets a new common framework across all 28 countries of the European Union on how troubled banks should be dealt with - from precautionary, early interventions to prevent failures, to a framework for managing the orderly resolution of banks that operate across national borders. The agreement is due to come into force on 1 January 2015.

The paper explains why the BRRD is such an important milestone for Europe, within the context of the wider regulatory reforms taking place in the industry, and also highlights controversial and concerning aspects of the deal. At heart, this Directive aims to ensure that bank creditors will contribute significant funds in the event of a bank failure; this has the potential to fundamentally alter the risks and costs of capital that investors may provide to banks.